Best Bet: 90-day Home Listing With Realty Agent

March 09, 1986

Q--I need help on listing a home for sale. I`ve talked to several realty agents about listing. One wanted a six-month listing but finally agreed to 90- day listing. But the agent I prefer insists on a four-month listing. He says the average sales time for homes in our town is 110 days so he needs that much time to market my home. Do you think I should sign the four month listing?

A--No. The 110-day average home sale time in your town is irrelevant. The prime reasons some homes take a long time to sell are (1) bad location, (2)

poor condition, (3) overpriced, and (4) luxury homes that appeal to a limited number of prospective buyers. Unless your home is in one of these categories, it should sell within 90 days. The reason I recommend a 90-day listing is the agent then has plenty of time to market your home but in case the agent turns out to be ineffective, then you`re not stuck with a long listing.

Q--Our house is on a busy street where several nearby houses have been rezoned to allow commercial office use. Although we have no plans to move out or sell, should we apply for commercial rezoning?

A--Commercial zoned properties are usually worth more per square foot than are residential properties. Since your city officials are apparently in a mood to approve rezoning, it wouldn`t do any harm and might be profitable to rezone your property now. Consult a local real estate attorney for assistance. Q--We own our home plus three rental houses. Since mortgage interest rates seem stable now and are down from their heights of a few years ago, we are considering refinancing our mortgages to (1) lower the monthly payments,

(2) produce tax-free cash for us, and (3) possibly get some assumable mortgages in case we decide to sell within the next few years. The loan which especially concerns us is an adjustable rate mortgage at 13.78 percent. Although interest rates have come down, the rate on this loan went up. We wrote to the president of the S&L who has this loan and he wrote back an unintelligible letter which just confused us more. Do you think we should refinance our loans now?

A--Today is an excellent time to refinance mortgages for the reasons you stated. Of course, not every mortgage should be refinanced. Your low interest rate mortgages should be retained. If you want to take some of your equity out of properties which have existing low interest rate loans, then add a new second mortgage and leave the desirable first mortgage untouched.

You would be wise to refinance the mortgages where the new loan will be at least 2 percent, but preferably 3 percent, below the old loan`s interest rate. To illustrate, if you find a new loan at 11.78 percent or lower, then you should consider refinancing that 13.78 percent mortgage.

But the second refinance criteria is your monthly mortgage payment savings should pay for the loan refinance costs within a maximum of three years. For example, suppose your refinanced monthly mortgage payment will drop by $100 but the new loan will cost $3,000 for loan fee and title/escrow charges. Your loan cost ``payback period`` is 30 months and every month after that is pure profit, so it would pay to refinance in this example.

However, be careful about refinancing with a new adjustable rate mortgage. As you discovered, ARM loans are deceptive. Be sure you understand the index used to adjust the interest rate; ask lots of questions about how your payments can change. The best ARMs have these safeguards: (1) fully assumable without change of loan terms for a minimal fee by a future buyer,

Q--Some time ago you wrote about the opportunities to buy real estate at wholesale prices by tracking foreclosure sales. But you failed to warn bidders at the foreclosure sale about the ``redemption period.`` We went to a foreclosure sale on a $22,000 second mortgage and were the only bidders. Naturally, we were thrilled at being able to buy the house for about $74,000

(total first loan plus our bid on the second loan) when similar nearby houses are selling for up to $150,000. But then we went to buy title insurance and were informed the IRS had recorded a $42,000 lien against the house and the IRS has 120 days after the sale to ``redeem.`` Why didn`t you warn us about the redemption period?

A--Don`t worry. The IRS rarely redeems property after a foreclosure sale. However, if the IRS does redeem by paying your $22,000 plus 20 percent interest, you will have made a profitable investment for a few months.